Indonesian govt plans switch to fixed fuel subsidy

A fuel attendent at the state-energy firm, Pertamina fuel station prepares to fill up motorists vehicles in Jakarta.

JAKARTA - The Indonesian government wants to set fuel subsidies at a fixed amount at petrol stations to make government costs more predictable, the country's finance minister said on Tuesday.

In his first month in office, President Joko Widodo slashed nearly 10 per cent of planned budget spending next year by taking the politically risky move of raising subsidised gasoline and diesel prices.

Indonesian currently sets domestic fuel prices below the market price, with the government subsidising the difference. Widodo last week hiked fuel prices by 2,000 rupiah (S$0.21) per litre, with subsidised gasoline now costing 8,500 rupiah and diesel 7,500 a litre.

To limit an increase in future fuel subsidy costs, the finance ministry is working on plans to fix the government subsidy at a specific level per litre.

"The government has serious plans to implement a so-called fixed subsidy scheme ... to fix the amount of subsidy per litre," said Finance Minister Bambang Brodjonegoro at an investment conference in the capital.

"From a fiscal point of view, the fuel subsidy budget will be much more manageable." He did not elaborate, saying details were still being reviewed.

A fuel subsidy cap will need approval by the opposition-dominated parliament.

Thes fuel price hike led to some protests in major cities throughout Indonesia, but the reaction in the capital was fairly muted.